How to profit from applied

How to Profit From Applied Gann & Fibonacci The Definitive Guide to Market Geometry Space & Time By Gene Nowell Copyright © 2013 Gene Nowell All rights reserved ISBN-10: 148398267X ISBN-13: 978-1483982670 CONTENTS Introduction 1 The Mysteries of Price & Time Geometric Angles & Charts Types of Charts 12 Constructing Fibonacci Fan Lines 21 Trading System or Trading Method 26 Gann Grid 36 360 Price Analysis 53 Square of 62 Harmonics in Numbers 66 10 Number Seven 77 11 Money Management 85 DEDICATION This book is dedicated to the wonderful person who has been an inspiration in my life One who's humor, good nature, wisdom; encouragement and love have always been there before I've had the need, my Mother God rest her soul INTRODUCTION Many of the studies in this book are focused on the application of angles and how they relate to previous market swing highs and lows and future points of price and time resistance Some of these angles are from Gann's work, others are Fibonacci Fan Lines and some are my own techniques Regardless of which ones they are, you will come to understand the significance of them and how you can use them in your every day trading It makes no difference which time frame they are applied to, the principle and results are close to being the same Some chart illustrations are from the Forex markets and others cover some of the traditionally traded markets like the S&P and Metals When I was introduced to W.D Gann, I studied everything I could get my hands on Gann Courses, Books, Seminars, Radio Programs, Tools, Computer Programs etc; the more I studied, the more I realized the depth of Gann's work However, most of it did not have the accuracy I was looking for But there are a few techniques I have found to be quite accurate I guess I am not smart enough to understand all of Gann's theories It is my firm belief that W.D Gann, at times, tapped into the depths of knowledge of the universe that is unknown Something like Edgar Cayce did when he went into his trances Gann published a book called the MAGIC WORD In this publication, he spoke of the importance of meditating and verbal communication so one could be in tune with the Harmonic Vibrations which he believed are the foundation of the universe Unless a person pursues this avenue of the unknown they will most likely not comprehend all of Mr Gann's Work I am not one who has taken his work to that level but, I have taken the angle techniques he used and dissected them front to back, back to front, inside out and more and then discovered some other techniques that have a real significance in technical analysis One of the most important pieces of knowledge I have acquired over the years is this: Support resistance is not always on the horizontal plane It keeps changing based on where market price is in relationship to time There is a dimension not seen on charts unless geometric angles are applied and I intend to make that dimension and the symmetry of markets very clear to you in this book This is what I am all about and this is what the book is all about; ANGLES and making money When I talked to a publisher in the Carolina's about writing this book, it was suggested that I include significant days of the week and month to watch for reports that may affect price movement in the Forex and other markets Although this is very significant and should not be neglected, I have decided to exclude that information and in its place, discuss Money Management This is a subject that has been talked about but seldom looked into thoroughly Dr Barry Burns is one of the few who has a section in his online courses which addresses the issue He covers the major commodity markets like Grains, Financials and Metals W.D Gann gave important information about protecting your account equity and trading a certain number of contracts for the money in your account, but he did not expound on the types of contracts outside of the grains which can be traded I will go in depth regarding contract size and money needed to trade and cover stop numbers and placement Gene Nowell Proper money management will be covered more thoroughly than most other publications I believe this to be the KEY to successful trading It must be used in every trade you make I hold no responsibility for loss due to any adverse market conditions or any other reason Simply put, one must take responsibility for their actions and not blame losses on conditions or "THEM/THEY/THOSE GUYS" and others Next, I cover Gann and the fundamentals and then I get in depth on some of Gann's techniques I cover today's news and how it affects the future Included in this study I examine Gann's statement about how the fundamentals "CAST THEIR SHADOWS ON THE CHARTS" in advance of the news You will see these shadows and how they fall on the charts It is my intension to show you why Geometric Angles should be used when analyzing any market Furthermore, it is especially beneficial to apply angles to Forex charts over other markets The uninterrupted intra day data from Sunday night through Friday evening develops a foreground from which these geometric angles can be used as a roadmap to knowledge of market strength and weakness and ultimately profits I will show angle analysis like never before You will see an in depth study using Fibonacci Fan Lines and you will learn how to develop a successful trading plan using Fibonacci Fan Lines and Gann Angles along with my own proven methods and procedures Some of the material I reveal in this book has never been presented to the public before 1- THE MYSTERIES OF PRICE & TIME Who is wise enough to tap into the depths of knowledge that our loving God employed when he created the universe? A perfect harmony of mathematics and beauty were put into motion to create the wonders of the Galaxies This knowledge is far too great for any one man or any people to grasp To say that a BANG started creation is folly This is the same thing as saying one could take billions of letters and set a bomb off in the middle of them and expect to get a perfect library out of it all That is harder to believe than to believe in a Creator who put all what we see in perfect balance I am not trying to make a religious sermon out of this, but I am trying to put things in Perspective A BANG does not create, it destroys My point being, markets are part of the universe and a part of this creation And market movement is a reflection of the forces in motion which all have a time and place to culminate An in depth study of these relationships would take generations Mr W.D Gann just scratched the surface of this knowledge when he began using angles on charts to recognize certain price patterns Furthermore, he used the stars and planets as the foundation of his work At the end of his life I am sure he said I regret now that I am coming to the conclusion of my life and that I am only now beginning to understand price & time and their relationship to the stars There is a beginning and an end to everything Let us take a step in the direction of wisdom to try and comprehend these relationships of mathematics and geometry so a beginning and end of trends can be identified Sit back, relax and let's take a journey through the wonderful world of MARKET GEOMETRY SPACE & TIME As the markets evolve on a minute by minute display of Geometric relationships, there is clear evidence of previous highs and lows relating to future points of support/resistance and timing It must be understood that each new swing that is formed has a relationship of previous swings regardless of how insignificant they may appear To make this point more easily understood, let us consider the following example; Picture a pond in your mind's eye! Now throw a stone into the pond and notice the ripple effect this stone has created on the water's surface Each wave that moves out from the center is energy and this energy has an effect somewhere in time These energy waves are the forces that create market high and low at swing points If you throw a larger stone into the pond, a much greater set of waves will go out from the impact point Thus significant waves create longer lasting effects in the future and can also go higher from the surface than the effect of a smaller stone This would be the amplitude effect of price on the wave With that said, we now look for support resistance in the future This price support/resistance is not always on the horizontal plane It is however, always on an angular plane These planes are in direct relationship to previous referenced swings This is how the geometric angles come into play They relate to the waves of the past to show the geometry of support/resistance in the future The charts displayed in this book have geometric angles which originate from these previous swings (waves) and project out into the future for use as support/resistance and timing The TIMING POINTS are derived from the termination of an angle at strategic locations on the chart One of the key factors of this analysis is to know which angle will offer significant support/resistance Gene Nowell Another significant use of these angles is to use them as an indication of market strength and weakness When price moves up and down on the charts, we will be able to know the strength of the current trend and can have an 11 indication if the next new high in the trend will be the last before price moves in the opposite direction These and many more trading strategies will be found in this book, MARKET GEOMETRY SPACE & TIME Please explore my website: www.gannline.com and check out the dates projected and the videos that explain the products I use to obtain these targets FOUNDATIONS & WORDS FROM W.D GANN Speculation or investment is the best business in the world if you make a business of it But in order to make a success of it, you must study, be prepared, not guess, not follow inside information or depend on hope or fear If you do, you will fail Your success depends on knowing the right kind of rules and following them Gann said, "Keep this well in mind, For Stocks or Commodities to show up trend and continue to advance, they must make higher bottoms and higher tops When the trend is down, they must make lower tops and lower bottoms and continue on down to lower levels But remember, prices can move in a narrow trading range for weeks, Months or even years, and not make a new high or a new low But, after a long period of time when Stocks and Commodities break into new lows, they indicate much lower prices And after a long period of time when they advance above old highs or old tops, they are in a stronger position and indicate higher prices This is the reason why you must have a chart which goes a long way back, in order to see just what position a Stock or Commodity is in, and at what stage it is between extreme high and extreme low You will go broke trading on hope and fear You will never succeed buying or selling when you hope the market is going up or down You will never succeed by making a trade because you fear the market is going up or down Hope will ruin you, because it is nothing more than wishful thinking and provides no basis for action Fear will often save you if you act quickly when you see that you are wrong The fear of the market is the beginning of wisdom Knowledge which can only be obtained by in depth study will help you to make a success The more you study past records, the surer you are to be able to detect the trend of the future" There are a number of rules Gann used in his analysis with angles Above all his rules was the use of correct charts There are two types of charts that can be used for analysis They are the Market Day chart which shows trading days Then there are the Calendar day charts which encompass the entire calendar year and show all 365 days Any type of chart with the posted High, Low and close will be fine because time and price is a measuring instrument and as long as they are uniform, an angular structure can be applied When working with a market daily chart, the important thing is to set up all the data with no spaces for non-trading days like weekends or holidays If you have the capability to set up a calendar day chart, you will find important timing points that are not shown on the market day chart These must be laid out in the correct format As long as the format is uniform, it will be sufficient for angles OFFICIAL GANN CHART A Gann format chart, as shown below, features four, six, eight and sometimes ten squares to an inch This brief look at the exact chart types Mr Gann used himself is a familiar one to those of How to Profit From Applied Gann & Fibonacci CHART 51 How about days? Let’s look at the day count 90 days out is January of 2001 The Weekly chart below shows the evidence of this type of analysis 75 Gene Nowell CHART 52 These numbers can be broken down into 1/8, 1/4 or 1/2 I prefer to use the 1/4 when doing day counts and 1/8's when using weekly and monthly count However some numbers when square root is done are very low and can only be broken down to 1/2 When this occurs, trade the 50% in time You can also use 1/3 and 2/3 with your timing This will be more powerful if the low number is divisible by When doing this type of analysis, it is good to have a spread sheet with the formulas in place so all you have to is insert the date and price and the calculations will be there in an instant The beauty of this analysis is you will be prepared to take action when the time comes But make sure the low or high being used is a significant one I have yet to find a consistent way to use this technique on intraday charts 76 10- HARMONICS IN NUMBERS I not know if W.D Gann was a religious man, or if he attended church each Sunday But I know this He had a sincere reverence for God He consistently referred to the Scriptures and the numerology within, especially the number SEVEN According to the scriptures, this number is used by God numerous times to signify completeness In the Book of Revelation the number SEVEN is used throughout There are SEVEN churches, SEVEN Spirits, SEVEN stars, SEVEN seals, SEVEN trumpets, SEVEN vials, SEVEN personages, SEVEN dooms, and SEVEN new things SEVEN symbolizes Spiritual Perfection All of life revolves around this number SEVEN is used over 700 times in the Bible It is used 54 times in the Book of Revelation The whole Word of God is founded upon the number SEVEN It stands for the SEVENTH day of the Creation Week, and speaks of the Millennial Rest day It denotes COMPLETENESS or PERFECTION “In the days of the voice of the SEVENTH angel, when he shall begin to sound, the mystery of God should be FINISHED.” “It is DONE” is another expression found in connection with the number Seven “And the SEVENTH angel poured out his vial into the air; and there came a great voice out of the temple of heaven, from the throne saying, it is DONE.” (Revelation 16:17) There are SEVEN notes in the musical scale All other pitches are only variations of these When the musician uses the eighth note he goes back to “do” and starts over Man named the notes but God fixed the sounds, even as God fixed the days of the week, and man named them When Israel took the city of Jericho God told them to march around the city SEVEN times Thus, on the SEVENTH day, when they marched around the city SEVEN times, they COMPLETED their marching The trumpets were blown and a great shout brought the walls down (Joshua 6:1-16) Gann used this number as a point of resistance When markets move up 7x7 the 49th is the completion of the cycle Let’s look at an example of this Chart 53 below shows a significant low in the EUR/USD currency pair When 49 Market days are measured out in time, we have the mid-point of the cycle high We see these type of tops quite often in markets Notice the stochastic at the bottom; this shows %K at its cycle low 77 Gene Nowell CHART 53 This type of timing analysis is not always precise and doesn't always pin point the exact time It only indicates that a cycle is about to come to an end or has completed its wave and may be moving in the opposite direction It also does not always apply to a market moving up It can be any cycle The next chart shows a cycle low coming off a cycle low in the E-Mini S&P 49 days out 78 How to Profit From Applied Gann & Fibonacci CHART 54 The arrow to the left is the beginning of the cycle and the three arrows show the 49th calendar day 79 Gene Nowell You can pick any market and this type of analysis with the same results The March 2013 copper Chart 55 shows the final bottom of a market low and then a move to the upside At exactly the 49th calendar day a market top came in CHART 55 80 How to Profit From Applied Gann & Fibonacci Chart 56 is March Coffee 2013 This time the 49th day is a Calendar day CHART 56 81 Gene Nowell On the same Coffee Chart 57 we have, (with Red/Black arrows) a low to low on 49 Trading days CHART 57 82 How to Profit From Applied Gann & Fibonacci Chart 58 is an S&P 500 weekly chart with the 49th cycle coming in at a low from a low starting point CHART 58 83 Gene Nowell The SEVENTH and FINAL Chart 59 shows a two cycle convergence at one point This is once again the mid-point of the cycle high The long cycle is 49 Market days and the short is 49 Calendar days CHART 59 As you this type of Time/Cycle analysis, you can incorporate it with some of the other timing I showed in this book I have now come to the conclusion of what I want to say I sincerely hope what I have written and shown will help each and every trader that reads this book If only a portion is helpful, it will be a good thing I wish all you fine folks peace, prosperity, good health, good will and good trading 84 11- MONEY MANAGEMENT Even though it is last, this chapter addresses what I believe to be the most important aspect of Successful trading Money Management is understood by some people and practiced by few Let me put into words exactly what I mean by Money Management or Risk Management as it pertains to trading It is the incorporation of established rules and guidelines which help prevent the excessive loss of capital in a trading account In this book I have established a very good set of guidelines which I believe will help you with your money management in the Forex, and precious metals markets If you trade other markets like the S&P, Bonds, Grains etc; you can benefit from this by just using a little common sense and a calculator The initial deposit to open most Forex accounts can be as little as $500 Some firms allow $250 I suggest a bare minimum of $2500 It is better to have a higher starting balance ($5000 or more) so you can have some breathing room when putting on a trade If you are planning on making this your full time profession, I suggest at least $50,000.00 The reason for this IS AS FOLLOWS: Currency Pairs are traded in mini lots of $10,000 face value These Mini Lots or 1/10th of a full contract ($100,000) are starting points for money management Knowing contract size, margin requirements and account equity is a must for every trader All Forex Pairs will have these contract sizes Margin (or earnest money) for a lot or $100,000 varies depending on the Forex Firm The firm I have my account with requires approximately $3000.00 for a full contract The following suggestions are intended to be a guideline of Risk Management for the Forex Trader I hold no responsibility for loss due to market fluctuation or volatility of any kind or other unexpected circumstances Simply put, when trading any security, a foundation must be laid out and built upon by making good decisions The ultimate reward will be a consistent stream of checks coming into your bank account, rather than going into the brokerage firm’s account MONEY MANAGEMENT RULES FOR EVERY 1/10th LOT YOU TRADE, there should be a minimum of $500 equity in the account If you are putting on 5/10ths of a full contract or mini lots, you must have at least $2,500 equity in the account If a full lot (10 mini's) or $100,000 face value is traded, you should have no less than $5,000 equity Another example is if an account has a balance of $25,000 full contracts can be traded and still be within the guidelines of Good Money Management If you put on a position of minis and only have $1500 in your account and you use a 30 pip stop, that's $150 risk which is 10% of your equity If you lose trades in a row, you have just blown almost 1/3rd of your account equity This is not a smart thing to If you stay within the parameters I have presented, rule number will be your best friend WHEN TRADING GOLD on the international markets, the rules apply even more With the volatility the metals have experienced these past few years; money management will be a life preserver in deep water For every 10 ounces of gold you trade, make sure there is a minimum of $1000 in your account Simply put, $100 equity for every ounce of gold 85 Gene Nowell traded Since gold is traded in 10 cent increments, use the 30 point or 1/10th equity stop rule or in this case, $3 dollars when day trading Adjust your stop when using daily charts Don't be trading with just a few hundred dollars in your account Just the math and you will see that $10,000 is the bare minimum needed to trade a Comex contract of 100 ounces of Gold STOPS MUST BE USED at all times The following rule is for day trading The place where you are going to put a stop should be considered before executing a trade Before you enter a trade, evaluate your profit to loss potential It is recommended to use no more than a 30 pip stop loss but this can vary at times Larry Williams writes in his books that he always figures he will lose when he executes a trade in the markets Think about that for a minute! If we all plan on losing when we trade, then we are going to make sure our stop is not going to be 15 miles away risking a wad of cash If the risk is too great, then skip the trade There is always another time or day to trade NEVER RISK MORE than 1/10th of your equity on any one trade Always give yourself the advantage before entering If you enter a market with a stop that is 100 pips away, you are already in a losing position You should be in a position where your stop is no more than 30 pips (this can vary on occasion) on the average This will give you a risk of about 1/18th of your account equity on any one trade MARKET ENTRY IS VITAL: This is one of the hardest things to It requires discipline, premeditated planning and an awareness of market position In this book, I will give you the tools how to tell Market strength and weakness Wait for the trade to line up and be there to pull the trigger when all signs show a green light Examples will be shown in the following chapters THE COMFORT ZONE: This is probably the least talked about of all the things associated with trading I have read many books on Trading and few even mention this very important subject Do not underestimate its value When you enter a trade and over extend your account equity, your comfort zone narrows and you are more prone to exit a trade with a loss or a minimal profit Are you one that uses up your Maximum Equity on Margin each time a trade is put on? If you are then you know what I mean A few bad trades here and there and your decision making is in the gutter and a lot of money is out the window Trade conservatively to build a trading technique and decent method for your own good Stay away from the greed factor The temptation is always there to make that "KILLER PROFIT" to make up for the big losses you have sustained in the past Submitting to this temptation is the "KISS OF DEATH" to your account equity and peace of mind! PAY YOURSELF when the profits start rolling in Some investment counselors call the money in your trading account risk capital This is money that you will not miss To heck with that thinking I WILL miss it if it leaves my account and goes into another I consider the money in my trading account part of my family and I want my family to grow and prosper I am not willing to throw them out the window Try to set some time frame or money goal to where you can draw a payment or check from your account It is nice to have these checks coming your way instead of you sending them out The bottom line is making 86 How to Profit From Applied Gann & Fibonacci money! When you make money, you can use it to help others or attend to your own needs or turn it over to your sweetheart so she or he can put it in the retailers account and help the economy Greatness starts and ends with money management It wasn't until I grasped the importance of this seemingly simple approach to trading, that I started making money instead of losing it 87 88 RISK DISCLOSURE DISCLOSURE OF RISK: THE RISK OF LOSS IN TRADING STOCKS, FUTURES, FOREX AND OPTIONS CAN BE SUBSTANTIAL; THEREFORE, ONLY GENUINE RISK FUNDS SHOULD BE USED if/when participating in trading and investing STOCKS, FUTURES, FOREX AND OPTIONS MAY NOT BE SUITABLE INVESTMENTS FOR ALL INDIVIDUALS, AND INDIVIDUALS SHOULD CAREFULLY CONSIDER THEIR FINANCIAL CONDITION IN DECIDING WHETHER TO TRADE HYPOTHETICAL PERFORMANCE RESULTS HAVE MANY INHERENT LIMITATIONS, SOME OF WHICH ARE DESCRIBED BELOW NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL, OR IS LIKELY TO, ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN HISTORICALLY, IN FACT, THERE ARE FREQUENTLY SHARP DIFFERENCES BETWEEN HYPOTHETICAL PERFORMANCE RESULTS AND THE ACTUAL RESULTS SUBSEQUENTLY ACHIEVED BY ANY PARTICULAR TRADING PROGRAM ONE OF THE LIMITATIONS OF HYPOTHETICAL PERFORMANCE RESULTS IS THAT THEY ARE GENERALLY PREPARED WITH THE BENEFIT OF HINDSIGHT IN ADDITION, HYPOTHETICAL TRADING DOES NOT INVOLVE FINANCIAL RISK, AND NO HYPOTHETICAL TRADING RECORD CAN COMPLETELY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK IN ACTUAL TRADING FOR EXAMPLE, THE ABILITY TO WITHSTAND LOSSES OR TO ADHERE TO A PARTICULAR TRADING PROGRAM, IN SPITE OF TRADING LOSSES, ARE MATERIAL POINTS WHICH CAN ALSO ADVERSELY AFFECT ACTUAL TRADING RESULTS THERE ARE NUMEROUS OTHER FACTORS RELATED TO THE MARKETS, IN GENERAL, OR TO THE IMPLEMENTATION OF ANY SPECIFIC TRADING PROGRAM WHICH CANNOT BE FULLY ACCOUNTED FOR IN THE PREPARATION OF HYPOTHETICAL PERFORMANCE RESULTS AND ALL OF WHICH CAN ADVERSELY AFFECT ACTUAL TRADING RESULTS As stated above: WE ARE NOT RECOMMENDING TO BUY, SELL OR INVEST IN ANY SPECIFIC STOCK, FUTURES, FOREX OR OPTION THIS PUBLICATION WAS DESIGNED FOR EDUCATIONAL AND RESEARCH PURPOSES ONLY TESTIMONIAL DISCLAIMER: Unique experiences and past performances are not necessarily indicative of future results! Testimonials are non-representative of all clients Trading Stocks, Futures, Forex, or Options involves substantial risk and there is always the potential for loss Your trading results may vary PitNews Press, or PitNews Magazine not pay for testimonials, most of our testimonials are unsolicited and voluntary The views and opinions expressed on any program are those of the producers and/or the persons appearing on the program and not necessarily reflect the views and opinions of PitNews Magazine, or PitNews Press VIEWER DISCRETION ADVISED: These programs are the sole responsibility of the authors and in no way reflect the views and/or opinions of PitNews Magazine, PitNews Press, or their partners MATERIALS CONNECTION DISCLOSURE: You should always assume that the owner of this publication has an affiliate relationship and/or another material connection to the providers of goods and services mentioned on this, and/or any of our affiliated or linked sites, and more than likely, we are being compensated when you purchase from such providers 89